Middletown man pleads guilty to conspiracy charges in bank fraud case

Thursday

Aug 7, 2014 at 11:12 AM

The man had been employed by Wilmington Trust Co.

Staff Report

Brian Bailey, age 51, of Middletown is facing a maximum penalty of five years imprisonment and a $250,000 fine to conspiracy charges filed at the U.S. District Court of Delaware, according to the court’s press release.

Bailey was employed by Wilmington Trust Co. as the Delaware Market Manager overseeing all lending in the state. He conspired with another loan officer, Joseph Terranova, and others to conceal the bank’s true financial condition, according to the press release.

Bailey entered a guilty plea on Aug. 4 before the Hon. Richard G. Andrews to conspiracy to commit an offense against the United States, as charged in a previously-filed Indictment and to a one count felony information, also charging him with conspiracy to commit an offense against the United States, both in violation of Title 18, United States Code, Section 371.

According to the press release, the conspiracy involved, among other things, extending credit to keep existing loan interest payments current, thereby causing the bank to misrepresent its reporting of past due and non-performing loans. The misrepresentations extended to, among others, the Federal Deposit Insurance Corporation, agents and examiners appointed to examine the bank, and the Board of Governors of the Federal Reserve System.

The criminal conduct enabled the bank to file false statements of condition, or “call reports,” with federal financial regulators on a quarterly basis throughout 2009. As set forth in the information, the bank underreported its past due and nonperforming loans by approximately $186,000,000 in the first quarter of 2009; $234,000,000 in the second quarter of 2009; $463,000,000 in the third quarter of 2009; and $373,000,000 in the fourth quarter of 2009.

Terranova previously entered a plea of guilty to the same underlying conduct in a separate case.

According to the indictment and plea agreement, Bailey participated in a separate conspiracy with James Ladio, the former chief executive officer of MidCoast Community Bank, whereby over a 12-year period they provided multiple loans to each other, through their respective financial institutions, under terms and conditions that would be unavailable to the general public.

“With today’s guilty plea we take another step forward in bringing to justice individuals whose criminal conduct contributed to the failure of Wilmington Trust. Mr. Bailey’s participation in both conspiracies demonstrates an abuse of power and betrayal of public trust,” said U.S. Attorney Charles M. Oberly III.

“Mr. Bailey’s underlying conduct of approving supplemental financing for failing borrowers contributed substantially to the bank’s demise. His conduct, and that of others, further enabled the bank to falsely underreport its level of nonperforming loans to federal regulators and the public by hundreds of millions of dollars throughout 2009. We hope that this conviction serves to demonstrate my office’s commitment to protecting the integrity of financial institutions and makes clear the consequences to those contemplating similar conduct,” said Oberly.

The case was investigated by the Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigation Division, the Special Inspector General for the Troubled Asset Relief Program, and the Office of Inspector General, Board of Governors of the Federal Reserve System and is being prosecuted by Assistant United States Attorneys Robert Kravetz and Lesley Wolf.